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Credit Card Usage Among Young Adults Psychology Essay
Credit card is an electronic payment instrument or indispensable credit that allows buying products and
services without using cash. With credit card usage, it needs to be disciplined, if not; it can cause harsh
consequences. According to Tan (2003) consequences such as uncontrollable debt, low credit ratings that
will affect credibility of applying loan in future, forcing to work for debts (indirectly influencing the intention of
working career performance, goal/ objective), bankruptcy, etc. Among all the consequences, the most serious
consequences will be bankruptcy. According to the statistics from Malaysia department of insolvency (2012), the
causes of bankruptcy due to credit card is 5 % (appendix 1). Although, it is significantly low percentages, but the
cases of bankruptcy is constantly increasing from 15865 to 19167 (appendix 2). Furthermore, Consumers
Association had reported in 2009 that, mostly the young adults that are between the ages of 20 and 30 had trap
into personal bankruptcy. (Zafar, et. al., 2010).
According to Bernama (2009) Malaysians had owed a total of RM24.4 billion credit card debt. From the statistics, it
shows that age range that under - 30 years old, are the leading age group of declared bankrupt due to credit card
debt. Out of the 3,548 people declaring bankruptcy by credit card, 1,774 belong to those aged 30 and below,
said Datuk Abdul Karim Abdul Jalil, director-general of the Department of Insolvency Malaysia, (2009). From the
latest survey of Financial Behaviors and Financial Habits of Young Workers carried out by the Consumer
Research and Resource Centre (CRRC), 47% of young workers having monthly debt payments that are 30% or
more than their gross income, which is in a serious debt situation. Also, the average purchase made on credit card
per month is RM 702.
Schor (1998) believes that one of the causes of overspending is easy credit. Most of the advertising was intended
to promoting high-end lifestyles and created pressure on young people to buy stuffs so that they could appear to
be cool or trendy (LCF, 2011). A relatively high level of disposable income that young adults had, but a low
degree of financial literacy it is coupled with (Palmer, pinto, & Parente, 2011). Marketing staffs of credit card that
around the country always target young adults as the largest customer groups. For this reason, most of the credit
card companies are using attractive encouragement such as rebates and prizes to hook young adults and its bring
up the effects that many young adults nowadays are suffering in credit cards debt due to overuse financial
expenditure and end up not capable to pay back their credit debts (Chong, V. S. W., & Lam, J. M. S, 2012).
Further, according to Ronnie Lim, (2010) head of consumer department of Alliance Bank, bank is using great, eye-
catching advertising, campaigns, packaging promotion and low-cost items in a partial time only to tempt the young
adults into impulsive buying, send-off the customers with spontaneous purchasing or holiday expenditure ahead
of their thought.
On the other hand, credit card also has positive side or can maximizing the usage of credit card but with
precondition thats the person use it wisely or well controlling in financing. By using the credit cards intelligently it
can be convenient for making purchases by admittance lines of credit that prefer to pay full amount in the end of
the month of cycle or installment (Sujit Chakravorti, 2006).Besides, according to Jeremy M. Simon, (2006) while
carry out an expensive purchase by using credit card its can gave instant purchase protections that it doesnt get
when paying by the ready money or ATM cards. In addition, when used for purchasing for some particular product,
some credit cards automatic lengthen the product warranties and if the merchants do not delivering what their
promising, the credit card issuer can complaint to the particular company.
In additions, it also can help to radically simplify for overseas traveling. For example, it is much easier to
dealing with converting currency when holding a credit card and meaning that a assurance of converting the
correct amounts of money with the lowest exchange rates (Odysseas Papadimitriou, 2011). On the other
hand, pick pockets will be not be threaten for the traveler, its because of even if the card is been stole, the money
of the traveler would not just loses. The traveler just need to report the lost card and by this any not permitted
purchases will be abstain (Odysseas Papadimitriou, 2011).
1.2 Research Objective
There are several objectives for us to complete this research project. The first
objective of the study is to identify the relationship between the compulsive buying
and credit card usage among young adults. The second objective is to identify
factors on compulsive buying influencing credit card usage among young adults.
1.2.1 Specific Objective
To determine whether there is a positive significance relationship between money
attitude and credit card usage among young adults
To determine whether there is a positive significance relationship between rewards and credit card usage among
young adults
To determine whether there is a positive significance relationship between compulsive buying and credit card
usage among young adults.
1.3 Research significance
The significant of this research is to educate and enhance knowledge among young adult about the problems of
credit card debt and acknowledge the young adults to be aware of the increasing debt with credit card and
management of finances. Besides, provide further analysis uses and marketing purposes for financial institution.
Moreover, based on this research, marketer can gain new knowledges on the ethics of marketing credit cards to
young adults and the action they can take to create awareness about credit card debt. Lastly, it helps to avoid
misuse credit among young adults and also reduced the problems that credit card impacting young adults
nowadays.
2.0 Literature Review
2.1 Review of past literatures
2.1.1 Credit Card Usage among Young Adults
Credit cards can be always used to reinforcing certain lifestyle preferences (Brenthal, Crockett, & Rose, 2005).
Self-control over material constrains and prudent financial planning are the responsible credit card usage entails
(Hayhoe, Leach, TUrner, Bruin, & Lawrence, 2000). A lucrative target segment for credit card marketing is
recognized by the youth market. (Kara, Kaynak, & Kucukemiroglu, 1994). Compare with older, youth are more
easily attracted by the modern lifestyle, shopping and some special bundle (including free gifts) offered by credit
card firms. (Biano & Bosco, 2002). Students are not realizing about the applicable interest rates because they
spend not enough time for finding credit card terms and (Warwick & Mansfield, 2000). (Khare, Khare, & Singh,
2011)found that in India males, they are more number than female that own a card. Several other studies have
also stated that males are likely to own more cards and also they use as revolving credit card than female. (Khare,
Khare, & Singh, 2011) There is lack of this kind of research in Malaysia; nevertheless, there is a study which in the
USA found that the duration of deferred payment and applicable interest rates is the most important considerations
by youth on credit cards. (Kara, Kaynak, & Kucukemiroglu, 1994). (Ramayah, Nasurdin, & Choo, 2002) found that
in Malaysia has the number of credit card owned significantly influenced by the usage level. (Ramayah, Nasurdin,
& Choo, 2002) also found that in Malaysia, the usage level was higher amongst cardholders who owned more
cards. Other studies have also found that the usage of behavior has influenced the ownership. For example, (Gan,
Maysami, & Koh, 2008) found that there have respondents use a credit card or at least once a week every day
have more card less than those who use their credit cards.
2.1.2 Money Attitude
Money attitude is your beliefs about the money (Ray, 2012). Money attitude is the
expression of beliefs that related to ones interpersonal relationship, attitude and
value concept and also the assessment of their importance, acts also as a medium of
trade among people reckoned by (Burgess, 2007) . Money attitude plays an
important role in deciding a persons financial management and also the level of
financial well-being is revealed by studies of financial issues. (Joo & Grable, 2004).
Normally, people will be more satisfied with their financial appraisals with the
stronger perception and positive financial attitudes. (Joo & Grable, 2004). There have
a study which is about the money attitude among university students state that there
have a different between males and females understand to money and some
researchers examined that the relationship between socio-demographic variables and money attitudes concluded
that male and females have different perception on money. (Allen, R., C.R, & L., 2008).
2.1.3 Rewards
Reward define as that the thing is given return for recognition of merit or for outcome of a service and good.(Dr.
Kevin Morrell. n.d) .The major goal of reward program is to drive usage and ultimately profitability through repeat
purchase behavior (Meyer-Waarden, L.2007).
The right of rewards credit card provides a privilege and bonuses for spending the money that you had already
use.( Melanie Pinola, 2011). There have different types of rewards, it could be cash-back program rewards card or
travel rewards card ( Kimberly Rotter 2013). In Indonesia, there have other types of reward programs provided to
credit card which are point rewards, discount gift for users (Novita, 2010). Banks need to advertise about the
programs more effectually to their credit card users that can to disseminate and reinforce awareness about point-
based reward programs and use the opportunity to inspire them to enjoy the benefits. (Liu,M.T., and James L,
Brock, 2009) . Large purchases get the points quickly but it will lose their value if there is high interest charge at
the end ( Kimberly Rotter 2013). Rewards can be a motivation that young adults will apply the credit card.
2.1.4 Compulsive Buying
Compulsive buying can be defined as a impulse control confusion, a mental confusion characterized by resistless
impulses to engage in harmful or foolish behaviors (Black, Donald W. 2007). Compulsive buyers incline to buy
overmuch number of objects they do not need and they maybe cannot afford. (Hoyer & MacInnis, 2001)A negative
consequence of the consumer culture that owned credit cards is compulsive buying. Compulsive buying behavior,
normally thought to be a long-term tendency to spend beyond ones needs and means (Mittal, Banwari, Morris B.,
Beatty, Raghuir, & Arch G., 2008),is increasingly recognized as a growing challenge among U.S college
students(Norum 2008; Roberts 1998; Wang and Xiao 2009) .
There is prove of college students desire to use up is increased credit card use, which has generated significant
worry among educators, parents, and regulatory groups. (Dickler 2008; Hook 2006; Mansfield and Pinto 2007).
From the financial view, compulsive buying causes economic and psychological problems. The person with an
addictive consumption behavior believes that purchasing more will relate to social status (Yuchisun & Johnson,
2004). Therefore, compulsive buyers experience debt, frustration, and bankruptcies (Roberts & Eli, 2001).
2.2 Development of framework
Theory Planned Behavior the link between belief and behavior of someone which is proposed by Ickek Ajzen
in 1985 through his own article From intentions to actions: A theory of planned behavior. There have three
dimensions in this theory which are attitude toward behavior, subjective norm and perceived behavior control.
Attitude toward the behavior can be defined as a persons common feeling of favorableness or unfavorableness
for that behavior ( Ajzen and Fishbein, 1980). Money attitude is your beliefs about the money (Ray, 2012) . We
using money attitude is an attitude that a person will have a feeling of favorableness or unfavorableness towards
credit card usage. Subjective norm can be defined as a persons think that most people are more important to
him think he should or should not perform the behavior in the particular problem ( Ajzen and Fishbein, 1980).
Reward define as that the thing is given return for recognition of merit or for outcome of a service and good.(Dr.
Kevin Morrell. n.d) We use rewards defined as subjective norm because rewards will
influence a persons perception that he/she think he/she should or should not
perform the behavior. And lastly the perceived behavioral control is a key component
of the theory of planned behavior., perceived behavioral control peoples perception
of the degree to which they are capable of, or have control over, performing a given
behavior (Fishbein and Ajzen 2010, 64). Compulsive buying can be defined as a
impulse control confusion, a mental confusion characterized by resistless impulses
to engage in harmful or foolish behaviors (Black, Donald W. 2007). So, compulsive
buying is a way that a person will hard to control his/her perception to purchase a
thing.
There have another similar theory but we do not use it is theory of reasoned action. Compare Theory Planning
Behavior with Theory of reasoned action, we prefer the former is because in the theory planning behavior there
have three kind of dimension which are subjective norm, attitude towards behavior and perceived behavioral
control. For the theory of reasoned action, it only has two kinds which are subjective norm and attitude towards
behavior. The most important different in these two theories is the former include a key component which is
perceived behavioral control that another dont have. Perceived behavior control is some kind that in peoples
perception of the degree, they may have the ability to control or to perform a given behavior.
2.2.1Proposed Theoretical/Conceptual Framework
Independent Variables Dependent Variable
Rewards
Money Attitudes
Compulsive Buying
H1
H3
H2
Credit Card usage young adults
2.3 Hypotheses Development
There are three IV will affect our DV (Credit Card Usage) , this study is have three hypotheses to be examined
empirically.
H1: Money attitude has significance with credit card usage among young adults.
.Money attitude is the belief toward the money. (Ray 2012). Some researchers had discussed that the main
reason for growth of personal bankrupt rate mainly cause by credit and debit card. So, the perception of money
attitude of a person is important. Prelec and Simester mentioned that the relationship between willingness-to-pay
and the means of payment via cash or credit card. Therefore, there will be significance between money attitude
and credit card usage among young adults. Hence, hypothesis null will be rejected.
H2: Rewards has significance with credit card usage among young adults.
Reward define as that the thing is given return for recognition of merit or for outcome of a service and good.
(Dr. Kevin Morrell. n.d). Other than that, reward can encourage someone to repurchase or repeat do the same
thing. Therefore, there will be significance that rewards will influence credit card usage among young adults.
Hence, the hypothesis null will be rejected.
H3: Compulsive buying has significance .with credit card usage among young adults
Compulsive buying is a behavior view as a broader category of compulsive
consumption behavior. There is prove of college students desire to use up is
increased credit card use, which has generated significant worry among educators,
parents, and regulatory groups. (Dickler 2008; Hook 2006; Mansfield and Pinto
2007).This situation normally cause by compulsive buying behavior that those
college student have. Therefore, there will be significance that compulsive buying will
influence credit card among young adults. Hence, the hypothesis null will be rejected.
3.0 Research Methodology
3.1 Research Design
Sekaran (2003) research design is set up to decide on how to collect further data, analyze and interpret them, and
finally, to find a solution to the problem. Besides, research design is a plan of actions that indicate specific steps to
test hypotheses achieve research purpose and help to choose alternative variables that has relationship with
independent variables.
Hair, Bush and Ortinau (2006), Quantitative research is the research that places heavy emphasis on using
formalized questions and predetermined response options in questionnaires or surveys administered to large
numbers of respondents. Quantitative research has been used to conduct this research study and the relevant
results in order to facilitate statistical analysis will be encoded as numerical descriptors. Due to the large number of
respondents who participated and where evidence is evaluated, and hypotheses are generated, the results of
quantitative research can be handle as decisive and can also be used for recommending the final course action.
Descriptive research refers to the nature of the research question that involves collecting quantitative information.
Descriptive research can help to define research problem, people surveyed, and method of analysis to begin data
collection. Moreover, 5W consist of who, what, where, when, why and how aspects of the research answers can
be defined. By using descriptive research, this able to gain information with reference to this research that is effect
of money attitude, rewards and compulsive buying on credit card usage in young adults. Thus, this descriptive
research is being use to evaluate the antecedent of credit card usage among young adults and understand the
importance of how the credit card usage influence them.
3.2 Sampling Design
3.2.1 Target Population
The target population will only be young adults between 18 to 28 years old from Universiti Tunku Abdul Rahman
(UTAR), Kampar. Thirty (30) sets of questionnaire had been distributed to the population of UTAR especially to
staffs and students who owned one or more credit cards. Target population chosen as UTAR student due to most
of the students are came from Generation-Y and considered as newbies to hold or use a credit card which can
positively or negatively influence their buying behavior.
3.2.2 Sampling Frame and Sampling Location
The sampling frame of this study is the university student credit card users, staffs, lecturers and tutors who
have previous experiences with credit purchase and currently owned at least one credit card. Furthermore, the
sampling location chosen was in the Cafeteria in Block C, H and K because many students from different faculty
are gathering at there. Thirty (30) sets of questionnaire would be sufficient to reach the objective of the research.
3.2.3 Sampling Elements
The respondents was identified in this study is credit card users from those that are
born from 1985 to 1995. Thus, the respondents will be of 18 to 28 years old and
consists of students, staffs, lecturers and tutors who have previous experiences with
credit purchase, both female and male.
3.2.4 Sampling Technique
For this study, sampling technique that we chose is non-probability sampling
technique. It means that each targeted population may not have a fix probabilistic
chance of being selected to become the sample. Respondents are chosen based on
researchers convenience and judgmental sampling. This method is chosen because it produces good estimate of
the characteristics of population and also it enable a large number of respondents to be evaluated in a relatively
short time.
3.2.5 Sampling Size
Sampling size determine the number of respondent involved in the research. Normally, larger size of population
may generate the higher accuracy of the possible outcome. In our research, we are distributing thirty (30) sets of
questionnaires to our respective respondents. These thirty set of questionnaires for thirty respondents may
sufficiently generate the possible outcome as well as able to meet the objective of the research.
3.3 Data Collection Procedures
There are two types of data collection method which is primary data and secondary data. In this research, we have
conducted only primary data of data collection method to identify the usage towards credit card. Primary data
sources included questionnaire that have been distribute to respective respondents.
3.3.1 Primary Data
Primary data collection is necessary when a researcher cannot find the data needed in secondary sources. In our
research proposal, we are using questionnaire in order to gather data from our respective respondents. Thirty (30)
respondents which include students from UTAR have been selected to answer our distributed questionnaire. We
decided to use questionnaire as our data collection method because it is the most economical way which provide
slightly accurate yet quickly and easily collected compared to other methods. Self-administered surveys are used
as research survey method.
3.4 Research Instrument (Questionnaires)
3.4.1 Questionnaire Design
In questionnaire, it consists of three sections which is section A, B and C. In section A there have about seven
question asking about the demographic of the respondents. This can help us to get to know the information of the
respondents themselves. In section B, we will ask about the tested independent variable such as money attitude,
rewards and compulsive buying each have four questions for this. Lastly, we will ask the measurement of
dependent variable which is credit card usage of young adult.
3.5 Pilot Study
A pilot study is a small scale preliminary study conducted in order to evaluate feasibility, time, and cost in an
attempt to predict an appropriate sample size and improve upon the study design prior to performance of a full-
scale research project.
The pilot test is a test that giving researchers a good chance to distinguish and solve the potential problems
from the questionnaire that they state out. By the way, the question in the questionnaire maybe will make
some respondents do not understand due to the questions are ambiguous or some of the question will
combine two or more issues in a single question. For this situation, we can call it as
double-barreled question. Other than that, there maybe have some question will
make respondents feel uncomfortable because the setting of question. Besides, its
also used to ensure that the ideas or methods behind the research are sound and
also used to test an idea or hypothesis.
Before conduct the full-scale research project, a total of 30 questionnaires were
distributed Utar, Cafeteria in Block C, H and K to check the accuracy and validity of
the questionnaire contents. The target population will only be young adults between
18 to 28 years old from Utar, Kampar.
3.5.1 Feedback
The feedbacks that gathered from the 30 respondents about the questionnaire are mainly giving a good feedback.
Among of them giving the feedback saying that questions are comprehend, the language is simple and easy to
understand and the structure of the question is well organized.
3.6 Data Analysis Tools
To analyse the data that we had collected, SAS software was used. Data analysis is the most difficult and most
crucial aspect of quantitative research. The object of analysing quantitative data is to determine the categories,
relationships and assumptions that inform the respondents general view and of the topic in particular (McCracken,
1988).
3.6.1 Descriptive Analysis
Descriptive analysis will be turn the raw data into another form that will be more easily to understand and interpret
such as to rearrange , ordering and manipulating the data which can provide descriptive information. In order to
facilitate the analysis form can in a brief and meaningful way, all form of it will present in a consistent way.
(Zikmund, 2003). Descriptive statistics help researchers to simplify large amounts of data in a sensible way.
3.6.2 Scale measurement
3.6.2.1 Reliability Test
(Sekaran, 2003) state that if need to process the reliability test, researchers would use Cronbachs Alpha method
testing tool. By using the Cronbachs Alpha, we consider the measure was only accepted in the level of reliability
resulted at 0.70 or higher.
3.6.2 Multiple Linear Regressions
The purpose of the multiple regressions is to understand to measure the strength of relationship between
independent variables and dependent variables and the variable must more than one. In the other hand, we can
say that multiple regressions is a mathematical regression test that can learn about the relationship between
independent and dependent variable. Normally, researchers will use multiple regressions to determine whether
which factors (independent variables) has the most significance towards dependent variable. For multiple
regressions, it will be calculated by the formula to study the relationship between two variables. Multiple linear
regressions can measure the strength of relationship between the money attitudes, rewards, compulsive buying
and credit card usage among young adults.
4.1 Findings and Discussion (pilot study)
In previous chapter, we have state that we going to use the SAS program to test whether there is a relationship
between our independent variables and dependent variable or not.
So, firstly we need to test our independent variables is reliable or not to all the respondents. Then,
Cronbachs Alpha is to test whether the result of independent variables are reliable or not. If the level of
result is 0.70 or higher then it is reliable. From the Table 4.1 all of the independent variables are reliable and
dependent variable also. Money attitude (IV1) which the number 0.7966 , rewards
(IV2) with the number 0.8273, compulsive buying (IV3) with the number 0.7687 and
also credit card usage among young adults (DV) with the number 0.7082. As we can
see, the result for all of the items of this research was in the range which from 0.70
so we can conclude that there has a good reliability between the items.
By the way, we have used another analysis tool to determine whether we need
accept the independent or not. The multiple regressions is used by us to test which
independent variables is more significance to dependent variable.
From the table 4.2 there have three independent variables show the multiple regression result which against
dependent variable. The significance level of this research is 0.05. For the money attitude (IV1), its Pr is 0.1556
so we can say that there is no significance relationship between money attitude and credit card usage among
young adults. For the other two IV which rewards and compulsive buying, the Pr value for them are 0.0002 and
0.0041. So we can say that there is significance relationship between rewards and credit card usage among
young adults and also a significance relationship between compulsive buying and credit card usage among young
adults. Besides that, we find that there have one independent variable is most significance relationship between
itself with the dependent variable which is rewards. Besides that,
Last but not least, we conclude that, rewards has more significance relationship with the credit card usage among
young adults compare with others independent variables.
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